Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Inflation’s Shot Across the Bow, Deflationary Pressure is Expected to Resurface

Stock-Markets / Deflation Jul 03, 2013 - 06:43 AM GMT

By: Clif_Droke

Stock-Markets On May 3, the bond market fired the proverbial “shot heard ‘round the world.” Treasury yields began a two-month climb to levels not seen in almost two years. Many analysts proclaimed the end of the 30+ year interest rate decline. The true significance in the yield rally isn’t that the long-wave deflationary trend in interest rates is over, however. Rather, it’s that the commencement of long-term inflation is within sight.


While the rally in Treasury yields does have longer-term significance, it’s still far too early to assume the downtrend in yields is over. As we’re still some 15 months away from the bottom of the 120-year cycle of inflation/deflation we can only assume the downward trend in interest rates remains intact. Additionally, as real estate analyst Robert Campbell has pointed out, “until the actions of the Fed speak otherwise, Fed policy is currently working to push mortgage rates down.”

The rally in Treasury yields, while impressive, should be put into context with the longer-term yield trend. Here’s what the Treasury Yield Index (TNX) looks like from the vantage point of a 2-year chart. In this relative short-term chart you can clearly see the attempt yields have made in establishing a new rising trend in relation to the steep drop in 2011-2012.



It’s only when we examine the long-term monthly chart of TNX that the true long-term trend becomes clear. The downtrend line that can be drawn by connecting the yield peaks from 1996 through 2011 hasn’t even been broken yet. The interest rate downtrend is therefore presumed to be still in force. It likely won’t be until after October 2014, when the Kress mega cycle bottoms, that we’ll finally see this downtrend broken.



What then is the ultimate significance of the sharp rally in bond yields? The spike in yields can only be appreciated by making historical comparisons with markets that behaved in a similar fashion. For instance, gold was in a similar long-term downtrend from 1981 through 1999 when, in the autumn of ’99, the yellow metal unexpectedly launched a vigorous rally from its long-term low of nearly $250/oz. to a high of over $330/oz. in just a few short weeks (see chart below). This wasn’t the official beginning of gold’s long-term bull market, which would actually begin less than two years later. It was, however, an advance warning that a major change of gold’s long-term trend was in the making.



Comparing gold with bonds isn’t as dissimilar as some may think, for both are excellent barometers of longer-term global liquidity and inflation/deflation expectations. Of the two, interest rates are a more important indicator of inflation and deflation, so it will be especially important to monitory the interest rate trend in the coming months as we draw closer to the 120-year cycle bottom.

The ultimate meaning behind the short-term rally in Treasury yields can only be known with certainty after the facts have become clear. It’s still far too early to discern what those facts may be. Based on historical examples, however, it’s probable that the yield rally is a “shot across the bow” preliminary to the beginning of a new long-term inflationary trend starting in late 2014/early 2015.

U.S. Economy

The selling pressure which hit stocks and bonds in June left the U.S. retail economy unscathed.

Among the individual corporate stock components of the New Economy Index (NEI), which measures the real-time strength of the economy, only Wal-Mart (WMT) took a sizable tumble in June. Monster Worldwide (MWW), the jobs component of the NEI, also plunged last month but its stock price accounts for only a small amount of the index.

Meanwhile Amazon (AMZN), EBay (EBAY) and FedEx (FDX) – the other important components of the index – are in varying degrees of health or recovery. The signals reflected in the stock price performance of these three stocks alone are worth a hundred conventional economic indicators of the type relied on by mainstream economists.

The NEI reading for last week was in line with the reading of recent weeks, viz. the NEI is still holding on above its 12-week and 20-week moving averages. The interim uptrend for the index remains intact (below), therefore we still have a confirmed “buy” signal for the U.S. economy.



Deflationary pressure is expected to resurface as we head closer to the final “hard down” phase of the long-term Kress cycle in 2014, but for now those pressures are confined mainly to Europe and Asia and haven’t yet appeared in the U.S. The domestic retail economy, along with the consumer spending that supports it, is still firm.

2014: America's Date With Destiny

Take a journey into the future with me as we discover what the future may unfold in the fateful period leading up to - and following - the 120-year cycle bottom in late 2014.

Picking up where I left off in my previous work, The Stock Market Cycles, I expand on the Kress cycle narrative and explain how the 120-year Mega cycle influences the market, the economy and other aspects of American life and culture. My latest book, 2014: America's Date With Destiny, examines the most vital issues facing America and the global economy in the 2-3 years ahead.

The new book explains that the credit crisis of 2008 was merely the prelude in an intensifying global credit storm. If the basis for my prediction continue true to form - namely the long-term Kress cycles - the worst part of the crisis lies ahead in the year 2014. The book is now available for sale at: http://www.clifdroke.com/books/destiny.html

Order today to receive your autographed copy and a FREE 1-month trial subscription to the Gold & Silver Stock Report newsletter.

By Clif Droke

www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules